Asymmetries in European inbound and outbound tourism: Normal, luxury or inferior good? Fresh evidence from a quantile regression

Angeliki Menegaki,George Agiomirgianakis,Aviral Tiwari

doi:10.54055/ejtr.v25i.423

Abstract

This paper studies aggregate inbound and outbound tourist demand in Europe for 1995-2015 with a new panel quantile regression approach. It employs tourist arrivals, tourist receipts and tourist expenditure. Besides real domestic income and real exchange rate, the demand is instrumented with environmental degradation and trade openness. Results show that tourism behaves like a normal good when tourist arrivals are used as a predictor of demand and a luxury good when tourism revenue is used instead. Conversely, tourism behaves like an inferior good when tourist expenditure is used.The results suggest that for inbound tourism in Europe to remain competitive, prices should be low to attract inbound tourism while tourism expenditure subsidization programmes should take place for European residents to be able to afford outbound tourism.

Highlights

Tourism demand in Europe is a topic worthy of investigation, because Europe is a popular tourist destination, with six of its member states among the world’s top ten destinations (Trip Advisor, 2018)
The outbound model i, j stand for origin and destination countries respectively, t stands for time, GDP stands for real GDP per capita, ER stands for the real exchange rate, CO2 stands for carbon dioxide emissions and Tr stands for trade openness
It is 0.8629 in the 1st quantile, 0.8717 in the 2nd quantile and there is a smooth decay from 0.8485 to 0.8064, namely from the 3rd to 11th quantile. This shows that when domestic income increases, this causes an increase in tourist arrivals, but this increase is less intense for higher international tourist demand (TA)

Summary

Introduction

Tourism demand in Europe is a topic worthy of investigation, because Europe is a popular tourist destination, with six of its member states among the world’s top ten destinations (Trip Advisor, 2018). In the macroeconomic set-up of the models we employ in this paper, we use real income in the destination country and real exchange rate (to represent the relative prices between Europe and the outer world) as price factors instrumented by two non-price factors, i.e. environmental quality and trade openness.

Results

Conclusion